Why do gas stations fluctuate their gas prices? What’s stopping them from charging a high price even when the market is down?

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Why do gas stations fluctuate their gas prices? What’s stopping them from charging a high price even when the market is down?

In: Economics
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Customers won’t stop at their station if their prices are higher than the station down the street. Prices fluctuate because the cost of oil changes based on many things, but mainly supply and demand. The recent price slashing stems from Russia picking a fight with the Saudis and the Saudis then creating a price war by pumping ridiculous amounts of oil raising the supply and cutting their prices, effectively trying to stick it to Russia who can’t survive at these low prices as long as the Saudis can.

They compete with each other for your business by having the lowest price. Can’t make any money off a high gas price if nobody stops by because your competitors’ prices are lower.

Gas stations are a great example of a [monopolistic competitive](https://en.m.wikipedia.org/wiki/Monopolistic_competition) market. Gas stations have to use the market value because there is so much competition. this prevents stations from theoretically charging more for their gas and getting more money.

The price fluctuates because they pay a different price for each gas shipment they receive. They can’t gouge the customers because there are gas stations everywhere. E.g., there is a station closest to my house. I’ve never been there. Why? Because there is a gas station across the street that is 10 cents less per gallon. IOW, they can’t gouge their customers because customers always can just go somewhere else.

In fact, it’s a lot easier to price shop with gas than with other things. If you’re in a grocery store, finding out that they charge a lot for milk might not get you to go to a different store because you’re already there and going to a second store may be a waste of time. With gas, you can see the price from your car and you’re already in the car, so you can just keep driving.